The Voice of the

Commonwealth's Counties

Finance Update: Problematic Assessment Bill Continued to 2025, Meals Tax Bill Amended, and More

Assessments of affordable housing: HB 1446 (Coyner) proposed a significant policy change to the assessment of affordable housing properties.  Although the bill was amended in subcommittee to limit its applicability to properties in certain federal programs, VACo continued to voice serious concerns about the breadth of the changes proposed and strongly encouraged this bill to be referred to the Housing Commission or other venue for a more thorough discussion.  On Wednesday, the full House Finance Committee continued the bill to 2025 with a letter to the Housing Commission.

VACo and partner organizations had expressed a series of concerns with the bill.

  • Under current law, assessors are required to use an income approach to value affordable housing in accordance with provisions of statute, which require the assessor to consider the contract rent and the impact of applicable rent restrictions; restrictions on the transfer of title or other restraints on alienation of the real property; and the actual operating expenses and expenditures and the impact of any such additional expenses or expenditures.
  • The bill would require assessors to use ONLY the income approach for property operated as affordable housing as part of certain federal affordable housing programs. Strictly prescribing the use of one methodology does not comport with generally accepted appraisal practices, which allow some flexibility to address circumstances where the income approach is not appropriate (for example, when property is under construction).
  • The bill did not provide solutions for situations in which the property owner fails to provide income and expense information to the assessor.
  • The bill included extensive provisions prescribing the assessor’s “understanding” of aspects of the affordable housing industry, which appeared to single out this type of property and elevate it over other types of property in the locality.
  • The bill required the assessor to provide property owners prompt (within 10 days) access to materials used in arriving at the owner’s assessment. Concerns were raised about the potential conflict with statutes mandating taxpayer confidentiality, as assessments may be prepared in part by referencing the confidential income and expense information provided by the owners of other like properties.
  • The bill provided that if the assessor failed or refused to make appropriate efforts in accordance with generally accepted appraisal practices to obtain materials necessary to arrive at the assessment of affordable rental housing, and the owner prevailed in its appeal to a board of review, board of equalization, or circuit court, the locality would be required to reimburse the owner for attorney fees and costs. VACo expressed concern that this provision would encourage frivolous tax challenges by requiring localities to pay attorney fees and costs for an owner’s successful tax appeal without also requiring owners to pay the locality’s attorney fees and costs for an unsuccessful challenge.

Meals taxes:  Legislation introduced as a result of problems with meals tax collections in the City of Richmond has been substantially amended to limit its applicability and scope.  HB 1483 (McQuinn) and SB 294 (DeSteph), as amended, apply only to cities with directors of finance.  The bills require that any voluntary meals tax payment that is accompanied by a tax return or written instructions as to its application will be applied in accordance with the return or written instructions.  In order to ensure that delinquent taxes do not “age out” under the statute of limitations, the legislation provides that in this situation, the applicable statute of limitations would be extended by a period of 12 months.  The bills also make clear that the director of finance has the discretion to waive any penalties and interest when he or she determines that the best interest of the locality will be served by such waiver.  VACo now has no position on the legislation since it no longer applies to counties.  SB 294 was passed by indefinitely in Senate Finance and Appropriations this week; HB 1483 has been reported by the House Finance Committee with the addition of an emergency clause.

HB 1535 (Jones) was introduced at the request of the City of Richmond and permits any county, city, or town that requires local businesses to collect meals taxes to allow such businesses a commission for such service in the form of a deduction from the tax remitted (this commission is intended to compensate businesses for credit card processing fees and other administrative costs associated with collecting the taxes), without requiring that the business be up-to-date on its taxes to collect the commission.  The commission would be capped at 5 percent.  The bill was reported from House Finance and is headed to the House floor.

Transient occupancy taxes and accommodations intermediaries:  HB 1328 (McNamara) and HB 695 (Ware) take different approaches to the collection of transient occupancy taxes from accommodations intermediaries.  HB 1328 would centralize collections of transient occupancy taxes from accommodations intermediaries with the Department of Taxation, which would be tasked with contracting with a third-party provider to develop an electronic interface for accommodations intermediaries to make a single filing and payment for all localities.  The electronic interface would allow for monthly distributions of taxes to the locality in which the taxes were collected.  VACo opposes the bill and spoke against it in subcommittee, where it was recommended to be tabled.  VACo has historically advocated for retaining local authority to administer local taxes.

HB 695 (Ware) would improve enforcement of compliance with tax collections and other local regulations for short-term rentals.  The bill requires accommodations providers and accommodations intermediaries to register with the Department of Taxation and provide information regarding the addresses of individual properties offered for short-term rental and amounts collected for room charges, fees, and taxes.  The Department would provide access to this information to the Commissioners of the Revenue or other assessing officials, who would be able to share certain information with local zoning officials.  VACo spoke in support of the measure in subcommittee; the bill has been reported and referred to the House Appropriations Committee.  In order to remove the bill’s fiscal impact in the upcoming biennium, its effective date was delayed until July 1, 2026.

Car tax:  HB 1308 (Green), which would have functionally eliminated the car tax by removing the $950 million cap on state reimbursement and requiring localities that receive reimbursement payments to reduce their tax rates to a fraction of a cent, was tabled in a subcommittee of House Finance last week.  SB 126 (New Craig), which would have dedicated a portion of state General Fund surplus revenues in excess of $250 million to car tax relief and increased from $20,000 to $30,000 the base value for a vehicle to qualify for personal property tax relief, was continued to 2025 in Senate Finance and Appropriations.

Grocery tax:  HB 540 (McNamara) would eliminate the local portion of the grocery tax and replace the lost revenue with a supplemental school payment that would initially be based on each city’s and county’s estimated average share of sales tax distributions attributable to sales of food and essential personal hygiene products between February 2022 and December 2023, and then based on a pro rata share of sales tax collections (after July 1, 2026).  VACo remains opposed to eliminating this local revenue source; while the bill would provide for replacement revenue, localities would be relying on the state to honor this commitment in the future.  This bill was continued to 2025 in House Finance; a companion measure was passed by indefinitely in Senate Finance and Appropriations earlier in the session.

Tax bills and assessment notices:  HB 1004 (Lovejoy), as introduced, would have required each local governing body to include with all real estate tax bills that are required to be sent by mail a document summarizing the major components of the locality’s budget for the last two fiscal years.  (Current Code language allows a local governing body to include information with real estate or personal property tax bills about how revenue is apportioned.)  VACo expressed concerns to the patron about the administrative costs involved in such a requirement, pointing out that many homeowners’ tax bills are sent to mortgage servicers, and that sending a separate notice to the homeowner would likely be necessary in order to accomplish the bill’s purpose.  The patron amended the bill to allow localities to provide such information on the assessment notice, at local option, and to permit the inclusion of a link to an online copy of the information.  However, House Finance subcommittee members were still concerned about the benefits of such notice relative to the administrative costs involved and tabled the bill.

VACo Contact:  Katie Boyle

Share This
Recent Posts
Categories